If organisations are face with making cost savings, often, reducing headcount by making redundancies is the first port of call. However, embarking on this journey can be complex. From deciphering when collective consultation is required to navigating the duration and planning phase, this article breaks down the key aspects of collective consultation, so you can understand the legal intricacies involved in the redundancy process.
While employers should take all reasonable steps to avoid a redundancy situation, if redundancies are unavoidable, managing the process legally and in a way that minimises the potential adverse impact on both those affected and ‘the survivors’ is paramount.
That said, the law around redundancy can be complicated, and the various technicalities that surround it can often be disorienting and complex.
When is collective consultation required?
Collective consultation is needed when an employer proposes to make 20 or more employees redundant within a 90-day period ‘at a single establishment’. An establishment is generally the unit or workplace to which employees are assigned – it must be relatively permanent and stable, but does not need to have independent management who can decide to dismiss staff, or be economically or administratively separate.
If an employer is proposing more than 20 redundancies across a number of workplaces, but less than 20 at any single location, it must consider whether the workplaces should be treated as a single ‘establishment’ so as to trigger the duty to consult. This will depend on factors such as whether:
- the unit performs specific tasks; and
- it has facilities, such as a workforce and an organisational structure, to enable it to perform those tasks
Employers need to bear in mind the 90-day period is a rolling period and could include redundancies which have already been made.
A redundancy for the purposes of collective consultation includes a dismissal for any reason not related to the individual employee. So for example, a requirement to inform and consult could arise if an employer is proposing to ‘fire and rehire’ – where an employer dismisses an employee and rehires them on new terms and conditions of employment which are generally less favourable for the individual.
Employers also need to consider the meaning of ‘single establishment’, which can pose difficulties for employers who operate large sites with different teams being managed independently. In this case, a joined up approach is required where one establishment is carrying out redundancies.
How long must collective consultation last?
Employers are required to consult individual employees and give them reasonable warning of impending redundancy. Consultation begins once certain specified information is given to employee representatives and must continue for a minimum period before any dismissals take effect. The minimum period depends on the number of proposed redundancies:
- 45 days where 100 or more redundancies are proposed
- 30 days where 20 or more redundancies are proposed
When planning redundancies, employers will need to build this time after the election of representatives into their redundancy planning to ensure that they carry out consultation for the minimum period.
Planning for collective consultation
Employers will need to look at whether they have a recognised trade union or employee representatives already elected for collective consultations. If not, employers will need to plan for an election, by the employees, of representatives for the consultation, which must comply with statutory rules.
The law requires ‘meaningful’ consultation. For example, employees are entitled to be consulted on the proposed selection process and scoring system. If employers fail to collectively consult the maximum extra compensation payable, known as a protective award, is 90 days’ pay per employee.
At the start of the consultation process the employer is legally obliged to give the following information to the representatives:
- The reason for the redundancy dismissals.
- The number of proposed redundancies and their job types.
- The total number of employees affected.
- The proposed methods of selection.
- The procedure to be followed in dealing with the redundancies.
- The method of calculating redundancy payment.
Consider the organisation as a whole – large businesses may have redundancies happening regularly, which could trip them into collective consultation if they’re not carefully managed. Alternatively, plans may be drawn up to ensure that the number of proposed redundancies is kept below the requirement for collective consultation. Employers should note that, in some cases, the expiry of fixed-term contracts could count when considering whether the duty to collective consult is triggered.
Employers must notify the Department for Business, Energy and Industrial Strategy (BEIS), using form HR1, either 30 days before the first dismissal takes effect (20 or more redundancies) or 45 days before the first dismissal takes effect (100 or more redundancies). This is a key step and a legal requirement for employers carrying out collective redundancies.
Employers must ensure they also carry out individual consultation to ensure that any redundancy dismissals are fair and do not risk claims from employees.
What are the risks of not carrying out collective consultation?
Breach of the collective consultation obligations carries the sanction of a ‘protective award’ of up to 90 days’ gross pay for each affected employee.
Failure to carry out consultation with employees can also risk claims of unfair dismissal – compensation for which could be up to a year’s pay per employee.
Employers who fail to notify BEIS will be committing a criminal offence, which carries a potential fine of up to £5,000.
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Given the risks of getting it wrong and the importance of planning, employers should take advice early where they are considering making 20 or more people redundant.
If you’re not confident in approaching and managing making more than 20 employees redundant, our Employment Law specialists can guide you through the steps required to ensure a fair redundancy procedure.